Five Basic Tax Tips for New Businesses

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If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips that can help get your business off to a good start.

 

  1. Business Structure. As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.
  2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.
  3. Employer Identification Number. You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.
  4. Accounting Method. An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.
  5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

 

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

Tips on Gambling Income and Losses

 

Whether you like to play the ponies, roll the dice or pull the slots, your gambling winnings are taxable. You must report all your gambling income on your tax return. If you’re a casual gambler, odds are good that these basic tax tips can help you at tax time next year:

 1. Gambling income.  Gambling income includes winnings from lotteries, horse racing and casinos. It also includes cash prizes and the fair market value of prizes like cars and trips.

 2. Payer tax form.  If you win, you may get a Form W-2G, Certain Gambling Winnings, from the payer. Generally W-2G’s are issues if you win $1,200.00 or more. The IRS also gets a copy of the W-2G. The payer issues the form depending on the type of game you played, the amount of your winnings and other factors. You’ll also get the form if the payer withholds taxes from what you won.

 3. How to report winnings.  You are required to report all your gambling winnings as income. This is true even if you don’t receive a Form W-2G. You normally report your winnings for the year on your tax return as ‘other income.’

 4. How to deduct losses.  You can deduct your gambling losses on Schedule A, Itemized Deductions. The amount you can deduct is limited to the amount of the gambling income you report on your return.

5. Keep gambling receipts.  You should keep track of your wins and losses. This includes keeping items such as a gambling log or diary, receipts, statements or tickets, even ATM transactions or bank records. If you are a slot machine player, the casino can also give you a Win/Loss Sheet, provided you use your “Players Card”.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947 of 702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

 

Don’t Fall for Tax Scams!

Money FlagEvery year, people fall prey to tax scams. We want you to be safe and informed – and not become a victim.

Taxpayers who get involved in illegal tax scams can lose their money, or face stiff penalties, interest and even criminal prosecution. Remember, if it sounds too good to be true, it probably is. Be on the lookout for these scams. 

Identity theft. Tax fraud using identity theft tops this year’s Dirty Dozen list. In many cases, an identity thief uses a taxpayer’s identity to illegally file a tax return and claim a refund.

fLAG eAGLEPervasive telephone scams.  The IRS has seen an increase in local phone scams across the country. Callers pretend to be from the IRS, The Department of the Treasury and the GAO (Government Accountability Office) in hopes of stealing money or identities from victims. If you get a call from someone claiming to be from these organizations do not provide any personal information or send them any money. Take down their contact information, so we can help verify if they are calling from a legitimate government organization. Often our government has specific telephone prefixes not available to the general public. If you know you owe taxes or think you might owe taxes, call the us and we can assist in dealing with the IRS.

Phishing.  Phishing scams typically use unsolicited emails or fake websites that appear legitimate. Scammers lure in victims and prompt them to provide their personal and financial information. The fact is that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

MONEYFalse promises of “free money” from inflated refunds.  The bottom line is that you are legally responsible for what’s on your tax return, even if someone else prepares it. Scam artists often pose as tax preparers during tax time, luring victims in by promising large tax refunds. Taxpayers who buy into such schemes can end up penalized for filing false claims or receiving fraudulent refunds. Take care when choosing someone to do your taxes.

Return preparer fraud.  About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But some dishonest preparers, prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.  Choose licensed professionals and reputable companies when hiring an individual or a company to do your return.  Only use a tax preparer that will sign your return and enter their IRS Preparer Tax Identification Number (PTIN).

OFFSHOREHiding income offshore.  While there are valid reasons for maintaining financial accounts abroad, there are reporting requirements. U.S. taxpayers who maintain such accounts and do not comply with these requirements are breaking the law. They risk large penalties and fines, as well as the possibility of criminal prosecution. The IRS has prosecuted and collected billions of dollars in back taxes, interest and penalties from people who participated in offshore voluntary disclosure programs since 2009. Don’t become another  defense statistic. It is a taxpayers right to reduce your taxes, but it also in the best interest of taxpayers to come forward and pay the taxes owed. Call our offices and we will help you legitimately save on your taxes.

Impersonation of charitable organizations. Taxpayers need to be sure they donate to recognized charities. Following major disasters, it’s common for scam artists to impersonate charities to get money or personal information from well-intentioned people. They may even directly contact disaster victims and claim to be working with our government to help the victims file casualty loss claims and get tax refunds.

False income, expenses or exemptions.  Falsely claiming income you did not earn or expenses you did not pay in order to get larger refundable tax credits is tax fraud. This includes false claims for the Earned Income Tax Credit. These taxpayers often end up repaying the refund, including penalties and interest or faces criminal prosecution.

Frivolous arguments.  Frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. There are numerous legitimate ways to contest tax liabilities, before the IRS and  in court. Don’t get trapped  by someone suggesting crazy schemes or defenses to reduce your tax liability or fight the IRS. These may lead to higher taxes, penalties and interest or even criminal prosecution.

Falsely claiming zero wages or using false Form 1099.  Filing false information with the IRS is an illegal way to try to lower the amount of taxes owed. Typically, fraudsters use a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 as a way to improperly reduce taxable income to zero. The fraudster may also submit a false statement denying wages and taxes reported by a payer to the IRS.

Abusive tax structures. These abusive tax schemes often involve sham business entities and dishonest financial arrangements for the purpose of evading taxes. The schemes are usually complex and involve multi-layer transactions to conceal the true nature and ownership of the taxable income and assets. The schemes often use Limited Liability Companies, Limited Liability Partnerships, International Business Companies, foreign financial accounts and offshore credit/debit cards.

Misuse of trusts.  There are reasonable uses of trusts in tax and estate planning. However, questionable transactions also exist. They may promise reduced taxable income, inflated deductions for personal expenses, ways to hide your assets, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes.  These trusts rarely deliver promised tax benefits.

Tax scams can take many other forms as well. The best defense is to remain vigilant.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947847-466-7947 of 702-966-2770702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

Eight Tax Savers for Parents

familyYour children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.

1. Dependents.  In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013.

2. Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit.

3. Child and Dependent Care Credit.  You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work.

4. Earned Income Tax Credit.  If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return.

5. Adoption Credit.  You may be able to claim a tax credit for certain expenses you paid to adopt a child.

6. Higher education credits.  If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000.

7. Student loan interest.  You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return.

8. Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent.

This article is provided for information purposes only and should not be relied upon for legal or financial advice. We would be happy to discuss how the information in this article affects or may help you. For more details about this matter, please contact our offices at 847-466-7947847-466-7947 of 702-966-2770702-966-2770.
IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.